New York— As reported in the latest issue of Investment
News, a spokesperson for the Division of Investment Management of the US
Securities Exchange Commission (SEC) recently confirmed that the division is
working on an interpretive release to supplement the soft dollar guidance
issued in July 2006. In remarks made at
a conference sponsored by the American Law Institute-American Bar Association
of Philadelphia, Jennifer McHugh, senior adviser to Director,
indicated that the focus is on guidance to fund directors, to
assist them in their oversight of soft dollar transactions:
"What the staff is preparing is a recommendation to
the commission that they propose guidance to fund boards of directors providing
them with insight regarding how to execute their oversight responsibility with
respect to the placement of fund trades, including trades that involve
soft-dollar-type arrangements," Ms. McHugh said.
According to McHugh, the overall goal is to continue to
promote increased transparency regarding the cost of brokerage, versus the cost
of research and other services provided. The SEC recognizes that significant
technological and marketplace changes, such as electronic trading and client
commission arrangements, are fostering more transparency. The SEC wants to ensure that any regulation
it provides does not impede market-led transformation:
"With all of these developments, it is probably
becoming easier for fund boards to monitor soft-dollar-type arrangements, and
we don't want our guidance to unintentionally interfere with what the market is
bringing about in terms of positive changes with respect to the trading of fund
portfolio securities," Ms. McHugh said.
McHugh’s comments suggest that the commission
transparency guidance contemplated by the SEC will be less extensive than the
commission disclosure regime in the UK and the latest regulation in Canada [Click here for more on the proposed Canadian soft dollar regulations.] The SEC guidance appears to be primarily
focused on disclosure to mutual fund directors, whereas other venues require
public disclosure of commission spending.
While it is true that market forces are facilitating structures that
provide more differentiation between execution costs and research costs, market
forces do not require disclosure of those distinctions. That must be the realm of the regulators.
To view the complete Investment News article: http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20080121/REG/529029524/1030/MUTUALFUNDS
Posted at 01:58 pm by Sanford (Sandy) Bragg
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